Monitoring inflation when applying ASC 830

Jun 28, 2022
Audit Other accounting topics Financial reporting PCAOB matters

Originally published Aug. 26, 2021. Revised June 28, 2022.

The Center for Audit Quality (CAQ) SEC Regulations Committee and its International Practices Task Force (the Task Force) periodically accumulates and discusses certain inflation data to assist companies in monitoring inflation statistics in connection with their determination of the inflationary status of countries in which they have operations. The most recent discussion document that represents the accumulation of information used to facilitate a discussion among the Task Force members is available on the CAQ’s website.

The discussion document categorizes the countries based on their cumulative inflation rates (derived from the International Monetary Fund (IMF)World Economic Outlook Report Database for April 2022) and implementation guidance in Topic 830 of the Financial Accounting Standards Board’s Accounting Standards Codification (ASC), Foreign Currency Matters. The countries included in the discussion document are those for which the IMF publishes data. Accordingly, there may be other countries that are not mentioned in the Task Force discussion document because the IMF does not include inflation data for all countries.

In the most recent Task Force discussion document, Ethiopia and Turkey were added to the list of countries with actual three-year cumulative inflation rates exceeding 100% in May 2022. In addition, Suriname and Yemen have been moved into this category based on actual three-year cumulative inflation rates, having been categorized as countries with projected three-year inflation rates greater than 100% in 2021.

The information in the discussion document may be helpful to financial statement preparers in applying ASC 830, in conjunction with their internal controls over financial reporting, to reach a conclusion on whether a country’s economy should be considered highly inflationary. Financial statement preparers should be especially prudent when monitoring inflation data in countries where there is a concern about the reliability of the inflation data.

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